Cryptocurrency Escrow System Using Multi-Signature Segmentation
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Cryptocurrency exchanges and wallets face significant security breaches due to unauthorized access to private keys, leading to substantial economic losses and loss of trust within the ecosystem, with existing strategies proving inadequate against sophisticated hacking attacks.
Innovation Solution
A computer-implemented method and system that establishes secure communication between a depositor's device and a secure cryptocurrency depository, using multi-signature addresses and hardware tokens to create and sign provisional transaction templates, ensuring secure escrow and safekeeping by requiring multiple signatures for transaction authorization, thereby preventing theft even if private keys or hardware tokens are lost or stolen.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If custodial cryptocurrency exchanges and wallets store funds using private keys, then transaction management and user convenience are improved, but security against unauthorized access deteriorates
Solution Approach 1:
The patent segments the private key into multiple parts and distributes them across multiple devices (first device, second device, third device). Each device holds only a portion of the private key, making it impossible for any single device to access the full key or steal funds alone. This segmentation resolves the contradiction by maintaining ease of transaction management through distributed access while dramatically improving security against unauthorized access.
Solution Approach 2:
The patent introduces a multi-signature wallet as an intermediary that requires signatures from multiple devices to authorize transactions. This intermediary mechanism allows convenient transaction management while preventing unauthorized access, as no single device can independently control the funds. The multi-signature wallet acts as a mediator that enforces security policies while maintaining user-friendly operation.
2Reliability
If multiple security strategies (hot-wallets, cold storage, multi-signature) are implemented, then security against hacking is improved, but system complexity increases
Solution Approach 1:
Instead of implementing multiple separate security systems (hot-wallets, cold storage, multi-signature arrangements with third-parties), the patent segments the private key across multiple devices that work together as a unified system. This approach maintains high security against hacking while reducing system complexity by eliminating the need for separate security infrastructures and third-party gatekeepers.
Solution Approach 2:
The patent enables the user's own devices to provide security services that previously required external systems. Each device in the distributed system contributes to security through its possession of a private key segment, eliminating the need for external hot-wallets, cold storage facilities, and third-party multi-signature arrangements. This self-service approach reduces system complexity while maintaining or improving security.
3Productivity
If centralized exchange custody is used, then transaction facilitation is improved, but vulnerability to security breaches increases
Solution Approach 1:
The patent segments control authority across multiple user-owned devices rather than centralizing it in a single exchange. Each device holds a portion of the private key, and transactions require coordination between devices. This segmentation maintains transaction facilitation through automated processes while eliminating the single point of failure that makes centralized exchanges vulnerable to security breaches.
Solution Approach 2:
The patent extracts the private key custody function from centralized exchanges and distributes it to user-owned devices. By taking out the critical security function from the centralized system, the patent eliminates the vulnerability to exchange security breaches while maintaining transaction facilitation through the distributed multi-device approach.
Data Source
Figure 1
Figure 2
Figure 2
AI summary
There is provided a computer-implemented method, a computer system and a cryptocurrency depository for enabling secure escrow and safekeeping of a cryptocurrency. The computer implemented method starts by establishing a secure communication between a first party device associated with a depositor of the cryptocurrency and a second party device associated with a secure cryptocurrency depository, in a cryptocurrency network. The secure cryptocurrency depository is a secure cryptocurrency escrow and/or a secure cryptocurrency vault. Further, the first party device and/or the second party device is enabled to transfer the available funds/tokens away from the multi-signature address using the second partially signed provisional transaction template and/or the first partially signed provisional transaction template in possession of the first party device and second party device respectively, in case the first party and/or second party private-keys/secrets and/or the hardware tokens are lost/stolen, thereby preventing theft.